Strong home buying is a sure shot indicator of rising consumer confidence, and the good news seems to be that in calendar 2021 people shrugged off the Covid effect and went looking for housing deals. The pent-up demand over two phases of lockdown drove home sales, as did the work-from-home (WFH) regime. The continuing softening of prices too have pushed the market. But will the trend sustain?
The latest residential property report for calendar 2021, published by LiasesForas, a real estate market tracker, said overall sales across Tier I cities in 2021 increased by 42% - with 2.64 lakh units sold compared to last year’s sales of 1.85 lakh units.
These figures have been corroborated by property broker Knight Frank India which said housing sales in India’s top 8 cities rose 51% last year, increasing to 2.33 lakh units from 1.55 lakh units in the previous year. When compared to the pre-pandemic levels of 2019 though, sales were down about 5%.
The macro-stimulus to the brisk home sales were affordable prices - prices that either remained flat, or rose marginally. Knight Frank said over 12-months of last calendar, the smaller metros — Chennai, Hyderabad and Bengaluru — registered an increase of 4 to 7 %, while Mumbai witnessed a marginal increment of 1%.
The LiasesForas report said the all-India metro prices were up just 3% in calendar 2021. One suspects home price figures have been fudged a bit by builders who compensate higher book prices by paying customers the initial interest on home loans, registration and stamp duty charges, etc. Mumbai’s Parel region, replete with new and old residential projects, has seen a 10-15% fall of prices over two years, 2020-21, and the southward movement continues.
Slew of stimulants
The return of the homebuyer in 2021 has been aided by a slew of stimulants. A number of states dropped the registration and stamp duty rates substantially; home loan interest rates were at rock bottom, and desperate builders offered an array of sweeteners
Home buyers are sensitive to small price benefits, and this was amply proved by the sudden spurt in purchases after a few states cut stamp duty rates. Maharashtra, for instance, in August 2020 brought down the stamp duty on property registrations from 5% to 2% till December 31, 2020. After this period, buyers paid 3% stamp duty between January 1 and March 31, 2021.
The concession spurred a spate of buying with flats worth around `1.30 lakh crore being sold between October 2020 and March 2021. The loss in stamp duty was more than made up in higher GST collections. A Colliers Jardine-CREDAI report said Central Mumbai comprising Dadar-Lower Parel-Worli-Matunga-Wadala saw the highest revival in 2021 with registrations rising 71% as compared to 2020. Some states like Karnataka and Uttarakhand have successfully experimented with a concessional 3% stamp duty for women registering their first property purchase. When the ticket size of the purchase is in crores, these waivers have a sizeable impact. Unfortunately, states, looking at short-term revenue, reimpose higher duties the moment the consumer makes a comeback.
Developers and government officials are hoping that the robust trend continues into 2022. However, the big challenge is consumer confidence. Builders over the years have built up a huge trust deficit, and the supply chain problems during the pandemic have just made things worse. Hundreds of projects lie incomplete locking away thousands of crores of home buyers’ money.
The National Capital Region (NCR), particularly outlying areas like Noida, has the worst record. With a stalled stock of 113,860 units valued `86,000 crore, NCR accounts for 66% of undelivered units among India’s biggest 8 metros. Most of these are from the well-known stables like Unitech, Amrapali Group and Jaypee, who were once big real estate brands. Many of their promoters and directors are in jail today.
But the market continues to suffer the spin-off effects. Customers today are reluctant to book property in under-construction projects. This has slowed demand and hit the cash flows of builders. The Real Estate Regulatory Act (RERA), promulgated in 2016 has begun to make a difference. The certification required from the RERA Authority and the penalties it has imposed has worked as an important deterrent, and has introduced a modicum of accountability in the system.
In recent days, in a rare burst of aggression, the UP RERA Authority has imposed a fine of Rs 1.08 crore on 7 defaulting builders. The largest is Rs 34 lakh imposed on Gardenia India. It’s not a big sum. But the process of naming and shaming is important. Bringing accountability back into the housing industry is an important step for its revival.